Category Archives: ERISA

September 26, 2024

Employer Considerations Following Wave of 401(k) Forfeiture Lawsuits

Alex Smith

Over the past year, numerous employers and their 401(k) plan fiduciaries have faced lawsuits regarding how forfeited employer contributions to their 401(k) plan are utilized. This wave of lawsuits began approximately a year ago when a plaintiff’s law firm filed putative class action lawsuits raising this novel claim against multiple large employers, including Intuit, Clorox, and Thermo Fisher Scientific in California federal courts. Since then, this claim has been included in numerous 401(k) plan lawsuits even though none of these lawsuits have reached a final judgment on the merits and only four have had decisions on motions to dismiss.

These lawsuits allege that the employer and its 401(k) plan fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), by using forfeited employer contributions to the 401(k) plan to offset future employer contributions instead of using the forfeited amounts to offset 401(k) plan expenses that were charged to participant accounts. The plaintiff’s counsel alleges that the employer and 401(k) plan fiduciaries are violating ERISA’s fiduciary requirements to make decisions for the benefit of plan participant because the employer benefits from a reduction in its future employer contributions at the expense of plan participants who have to pay for certain expenses that are charged to their 401(k) accounts. Read more >>

April 5, 2023

10th Circuit Rejects ERISA Arbitration Provision

Alex Smith

by Alex Smith

Courts have been mixed regarding the enforceability of arbitration provisions in Employee Retirement Income Security Act (ERISA) retirement plans since the U.S. 9th Circuit Court of Appeals’ 2019 decision in Dorman v. Charles Schwab Corp. Some employers and plan sponsors have considered adding arbitration provisions based on Dorman and the proliferation of ERISA class action lawsuits. Following the decision from the 10th Circuit (whose rulings apply to all Colorado employers) in Harrison v. Envision Management Holding, Inc. Board, however, employers in the 10th Circuit may want to reconsider.

10th Circuit’s decision

In Harrison, the 10th Circuit rejected the enforcement of an employee stock ownership plan’s (ESOP) arbitration provision in a lawsuit filed by a plan participant alleging the ESOP’s fiduciaries overpaid for the employer’s stock, breached numerous ERISA fiduciary duties, and engaged in prohibited transactions.

The 10th Circuit’s ruling focused on the ESOP’s specific arbitration provision, which allowed participants to obtain only individual relief and therefore made it impossible for them to obtain the plan-wide relief under ERISA. As a result, the 10th Circuit concluded the participants couldn’t effectively vindicate their statutory rights under ERISA. Read more >>

December 26, 2017

The New Tax Bill & Employee Benefits: What is Changing? What is Not?

By Molly Hobbs and Brenda Berg

On December 22, 2017, the President signed into law the Republican tax bill that was passed by Congress just days earlier. Beyond cutting individual tax rates temporarily and slashing corporate taxes to 21 percent permanently, the tax bill includes some important changes to the taxation of certain employee benefits.

Listed below are the major changes to employer-provided benefits under the final tax bill:

Revised: Time to repay “offset” employer-sponsored retirement plan loans.
- Currently, retirement plan loans are generally accelerated (i.e., immediately due and payable) when the plan terminates or the participant terminates employment. If the loan is not repaid, the plan will “offset” the loan against the participant’s account. This loan offset may be rolled over by making an equivalent contribution to an IRA or another qualified plan, but this must be done within 60 days of the date of the offset.
- Beginning in 2018, the period to roll over a loan offset is extended to the individual’s due date for the tax return for the year in which the offset occurred (including extensions).
Repealed: Employer deduction for qualified transportation fringe benefits, including commuting expenses.
- Currently, an employer can deduct the cost of certain transportation fringe benefit provided to employees (i.e., parking, transit passes, and vanpool benefits), even though such benefits are excluded from the employee’s income.
- Beginning in 2018, the employer deduction for qualified transportation fringe benefits is fully disallowed. In addition, except as necessary for ensuring the safety of an employee, the employer deduction for providing transportation or any payment or reimbursement for commuting to work is disallowed.
- These changes do not appear to prevent employers from sponsoring a qualified transportation plan to allow employees to elect to have certain transportation costs paid on a pre-tax basis.
Repealed: Employee exclusion of bicycle commuting reimbursements.
- Currently, an employee can exclude from income qualified bicycle commuting reimbursements of up to $20 per qualifying bicycle commuting month. These amounts are also excluded from wages for employment tax purposes.
- Beginning in 2018, the qualified bicycle commuting reimbursement exclusion is fully disallowed.
- Going forward, employers can still maintain a program for bicycle commuting, however, reimbursements under such program will be taxable to the employee.
Repealed: Employer deduction for entertainment, amusement and recreation provided to employees.
- Currently, an employer can fully deduct expenses for recreational, social, or similar activities primarily for the benefit of non-highly compensated employees, provided such activities directly relate to the active conduct of the employer’s business.
- Beginning in 2018, this deduction is fully disallowed. The employee exclusion remains unchanged.
Partially Repealed: Employer deduction for meals, food and beverages provided to employees.
- Currently, an employer can fully deduct any food and beverage expense that can be excluded from an employee’s income as a de minimis fringe benefit.
- Beginning in 2018, there will be a 50% limitation on the deduction for food and beverages that can be excluded from an employee’s income as a de minimis fringe benefit, including expenses for the operation of an employee cafeteria located on or near the employer’s premises. The employee exclusion remains unchanged.
Partially Repealed: Employee exclusion of value of certain types of employee achievement awards and the employer’s related deduction.
- Currently, an employer can deduct up to $400 (or up to $1,600 in the case of certain written nondiscriminatory achievement plans) of the value of certain employee achievement awards for length of service or safety. The employee receiving such award can exclude the award from income to the extent that the value of the award does not exceed the employer’s deduction.
- Beginning in 2018, the employee’s exclusion and employer’s deduction for employee achievement awards will not apply to cash, gift coupons/certificates, vacations, meals, lodging, tickets to sporting or theater events, securities, and “other similar items.” However, an employee can still exclude (and an employer can still deduct) the value of other tangible property and gift certificates that allow the recipient to select tangible property from a limited range of items pre-selected by the employer.
Repealed: Employee exclusion from income of employer-provided qualified moving expense reimbursements.
- Currently, an employee can exclude qualified moving expense reimbursements paid by his or her employer for the reasonable expenses of moving. These amounts are also excluded from wages for employment tax purposes.
- Beginning in 2018, the qualifying moving expense reimbursement is fully taxable to the employee, except for members of the Armed Forces on active duty who move pursuant to a military order.
Enacted: Employer tax credit for employers providing paid family and medical leave.
- Beginning in 2018, an employer that offers at least two weeks of annual paid family and medical leave, as described by the Family and Medical Leave Act (FMLA), to all “qualifying” full-time employees (and a proportionate amount of leave for non-full-time employees) will be entitled to a tax credit. The paid leave must provide for at least 50% of the wages normally paid to the employee. “Family and medical leave” does not include leave provided as vacation, personal leave, or other medical or sick leave.
- A “qualifying employee” is an employee who has been employed by the employer for at least one year, and whose compensation for the preceding year did not exceed 60% of the compensation threshold for highly compensated employees (i.e., compensation did not exceed $72,000).
- The credit will be equal to 12.5% of the amount of wages paid to a qualifying employee during such employee’s leave, increased by .25% for each percentage point the employee’s rate of pay on leave exceeds 50% of the wages normally paid to the employee (but not to exceed 25% of the wages paid).

In addition, employers should be aware that the tax bill eliminates the Affordable Care Act’s (“ACA”) individual mandate penalty starting in 2019. The individual mandate requires most individuals (other than those who qualify for a hardship exemption) to carry a minimum level of health coverage. Currently, individuals who do not enroll in health coverage can incur a tax penalty. Beginning in 2019, individuals will still technically be required to carry health coverage, but will no longer be penalized for failing to do so. This change to the ACA’s individual mandate could indirectly impact employers. For example, if fewer employees avail themselves of Exchange coverage and the related subsidies, an employer’s penalty risk under the ACA’s employer mandate will decrease. The lack of individual penalty could also destabilize the Exchange, resulting in more individuals looking to their employers for coverage.

Although earlier drafts of the tax bill called for repeal or modification, the following benefit provisions remain unchanged by the final tax bill:

The hardship distribution safe harbor rules incorporated into many retirement plans (proposals would have eased hardship rules);
The employer-provided child care credit;
Dependent Care Assistance Programs (DCAPs);
Adoption assistance programs;
Employer-provided housing; and
Educational assistance programs.

Takeaways for Employers:

In light of changes to employer-provided benefits under the final tax bill, employers should take the following actions:

Determine whether any changes are needed to retirement plan loan distribution paperwork regarding tax and rollover consequences.
Review qualified transportation plan(s) in light of the changes to qualified transportation fringe benefits and bicycle commuting reimbursements.
Review any company policies that involve recreational, social, or similar activities for employees, employee meals, employee achievement awards, and/or employee moving expenses.
Adjust payroll reporting as necessary and determine whether any taxable amounts are now eligible compensation for retirement plan deferrals and employer contributions.
Consider utilizing the new tax credit for paid family and medical leave.

November 6, 2017

Take Note: Benefit Plan Deadlines Approaching

By Molly Hobbs

At this time of year, important deadlines are quickly approaching for 401(k) plans and health and welfare plans. Here is a non-exhaustive list of significant employee benefit plan deadlines for the remainder of 2017 and early 2018. These deadlines are generally for calendar year plans, unless otherwise specified.

Retirement Plan Deadlines:

December 2

Distribute the following notices, as applicable, by December 2, 2017:
- Traditional 401(k) Safe Harbor Notice
- Qualified Automatic Contribution Arrangement (QACA) Notice
- Eligible Automatic Contribution Arrangement (EACA) Notice
- Non Safe-Harbor Automatic Contribution Arrangement Notice
- Qualified Default Investment Alternatives (QDIA) Notice
Determine when the annual participant fee disclosure was last provided and timely provide the disclosure. The annual participant fee disclosure is required every 14 months. Many employers provide this disclosure on or before the end of the year along with other year end notices.

December 16

Provide summary annual report (SAR) to participants if the 2016 Form 5500 was filed by extension on or before October 16, 2017. For non-calendar year plans, the SAR must be provided two months after the Form 5500 was filed, including by approved extension.

December 31

Adopt any discretionary amendments implemented during the plan year.
Ensure all required minimum distributions have been paid to applicable participants.

January 2018

Provide non-discrimination testing census data to the record keeper or Third Party Administrator (TPA).

March 15, 2018

Make sure TPA has completed non-discrimination testing, and distribute any excess contributions, in order to avoid excise taxes.

April 16, 2018

Distribute any excess contributions and related earnings from prior year.
Make any employer contributions to retirement plan(s) in order to receive tax deduction (plus extensions).

Health and Welfare Plan Deadlines:

November 1

If the plan’s open enrollment is approaching, fix the starting and ending dates for open enrollment and prepare and distribute enrollment materials such as the Summary of Benefits and Coverage.
Marketplace/Exchange open enrollment begins.

November 15

If the plan is a self-funded health plan, submit the Transitional Reinsurance Program (TRP) Annual Enrollment and Contributions Submission Form, reporting the annual enrollment count and selecting a payment schedule. If the Plan elected in 2016 to pay the TRP fee in two installments, the second payment is also due by November 15, 2017.

December 15

Open enrollment for the Marketplace/Exchange coverage ends.

December 16

Provide summary annual report (SAR) to participants if the 2016 Form 5500 was filed by extension on or before October 16, 2017. For non-calendar year plans the SAR must be provided two months after the Form 5500 was filed, including by approved extension.

December 31

Provide the following annual notices, as applicable, by December 31, 2017:
- Children’s Health Insurance Program (CHIP)
- Women’s Health and Cancer Rights Act (WHCRA)
- HIPAA Notice of Privacy Practices (at least every three years)
Many plan sponsors provide these notices with the annual open enrollment materials.

January 31, 2018

If the employer is subject to the ACA employer mandate, provide full-time employees with an IRS Form 1095-C documenting 2017 health coverage.

February 28 (March 31, if filing electronically)

If the employer is subject to the ACA employer mandate, file Form 1094-C and Forms 1095-C with the IRS.

Keep this deadline checklist handy to ensure that your plans remain compliant and as always, consult with your employee benefits counsel for additional information.

May 18, 2015

Plan Fiduciaries Beware: Your Ongoing Duty to Monitor Investments Allows Beneficiaries To Claim Breach Within Six-Year Statute of Limitations

By Mike Beaver

In a ruling that will likely raise the anxiety level of plan fiduciaries, the U.S. Supreme Court unanimously ruled today that beneficiaries of a 401(k) plan could pursue their claim against the plan’s fiduciaries related to mutual funds that were added to the plan eight years before the complaint was filed, despite the six-year statute of limitations normally applying to ERISA breach of fiduciary duty claims. The Court concluded that because fiduciaries have a continuing duty to monitor investments and remove those that are imprudent, a claim for breach of that duty is timely so long as the alleged failure to monitor occurred within six years of the filing of the complaint. Tibble v. Edison Int’l, 575 U.S. ___ (2015).

Higher Administrative Fees Prompted Lawsuit

In 2007, several beneficiaries of the Edison International 401(k) Savings Plan (Plan) filed a class action lawsuit against the Plan fiduciaries to recover alleged losses incurred as a result of excessive mutual fund fees. According to the beneficiaries, in selecting the investment choices available to Plan participants, the Plan fiduciaries had chosen six “retail-class” mutual funds, instead of identical “institutional class” funds. The retail-class funds carried higher administrative and management fees than the institutional-class offerings. Three of the funds were chosen in 1999, and the others in 2002.

As to the funds selected in 2002, the lower courts found that the Plan fiduciaries offered “no credible explanation” for selecting the higher-cost retail funds. However, as to the 1999 funds, the Plan fiduciaries argued that the ERISA statute of limitations applicable to fiduciary breaches would bar the beneficiaries’ claims involving the 1999 funds, because they were selected more than six years before the lawsuit was commenced. The statute, 29 U.S.C. § 1113, bars a fiduciary breach claim brought more than six years “after the date of the last action which constituted part of the breach or violation,” or “in the case of an omission the latest date on which the fiduciary could have cured the breach or violation” (emphasis added). The Ninth Circuit Court of Appeals agreed with the fiduciaries, and dismissed all claims relating to the 1999 funds.

A unanimous Supreme Court, however, reinstated the beneficiaries’ claims pertaining to the 1999 funds. The Court found that, although the funds may have been chosen previous to the fiduciaries’ action in selecting the 1999 funds, the statute did not bar claims relating to the fiduciaries’ alleged omissions since that time. Specifically, the Court held that ERISA fiduciaries have a “continuing duty to monitor trust investments and remove imprudent ones.” This duty imposes a “continuing responsibility for oversight of the suitability of the investments already made.” Since such continuing reviews by the Plan fiduciaries might have been required within the six-year limitation period, a claim that the fiduciaries breached their oversight and review responsibilities could not be summarily dismissed.

No Guidance on Oversight Duty

Having held that Plan fiduciaries have a duty to oversee and monitor investment decisions previously made, the Court provided little guidance as to what that duty entails. The Court articulated the fiduciaries’ oversight and monitoring responsibilities only in a broad, theoretical way, holding that “a fiduciary normally has a continuing duty of some kind to monitor investments, and that “the nature and timing of the review [are] contingent on the circumstances.” Because these circumstances had not been fully developed by the lower courts, the Supreme Court remanded the case for further consideration, noting that it did not necessarily find that the Plan fiduciaries had violated any of their duties.

Lesson for Fiduciaries

The Supreme Court has made clear that benefit plan fiduciaries have a continuing responsibility to monitor the suitability and prudence of a plan’s investment choices, and that the six-year statute of limitations runs from the alleged breach of this ongoing responsibility, not from the date a particular investment was initially selected. However, the Court provided essentially no guidance concerning how fiduciaries can fulfill this ongoing responsibility. The parameters of a fiduciaries’ ongoing responsibility to monitor and evaluate investment choices will, in all likelihood, be developed only by extensive future litigation.

Because the Court provided little specific guidance concerning the ongoing duty to monitor investment choices, plan fiduciaries will need to increase their focus on what little regulatory guidance is provided by the U.S. Department of Labor, and many fiduciaries will likely increase their reliance on objective, professional investment advisors. Of course, the choice of an investment advisor is, itself, a fiduciary act, and under the guidance of the Tibble decision, it is likely the fiduciaries’ ongoing responsibility to monitor the suitability and performance of advisors as well. In short, the Tibble decision expands the potential for fiduciary liability without providing much guidance on how that liability might be minimized.

June 27, 2014

U.S. Supreme Court Eliminates Fiduciary Protection for Employer Stock Investment

By Brenda Berg

On June 25, 2014, the U.S. Supreme Court issued its unanimous opinion that retirement plan fiduciaries are not entitled to a presumption of prudence with respect to the plan's investment in employer stock. Fifth Third Bancorp v. Dudenhoeffer, U.S., No. 12-751, 6/25/14. Instead, the fiduciaries are subject to the same duty of prudence that applies to all investment decisions made by ERISA fiduciaries. The rejection of the presumption of prudence might result in an increase in litigation involving employer stock. However, the Court also ruled that the ERISA duty of prudence does not require violating securities laws by disclosing insider information or otherwise taking action that could be in violation of securities laws, and the Court articulated a high pleadings standard for overcoming a motion to dismiss on that point.

Presumption of Prudence

Retirement plan fiduciaries have a duty to act prudently: with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity would act. Many federal circuit courts had adopted a rule that if the governing plan document requires an employer stock investment option, especially where such portion of the plan is designated as an ESOP, then there is a presumption that the fiduciary duty of prudence is met. This presumption is often referred to as the Moench presumption, after the case that first articulated it.

Fiduciaries also have a duty to follow the terms of the plan documents, unless doing so would be contrary to ERISA. The Moench presumption of prudence was an attempt to balance the duty or prudence with the duty to follow plan documents, considering Congress's intent to encourage employee ownership through ESOPs. Under the presumption, fiduciaries have a duty to follow plan documents that require an employer stock investment option, unless the employer is in such "dire" circumstances, such as an employer's bankruptcy, that would likely make the employer go out of business.

In the Dudenhoeffer case, the plaintiffs, who were participants in the plan, alleged that the fiduciaries had violated the duty of prudence by permitting participants to invest in employer stock, and that in July 2007, the fiduciaries knew or should have known that the stock was overvalued. From July 2007 to September 2009, when the complaint was filed, the Fifth Third stock price fell 74%. Although the District Court had dismissed the case based on the presumption of prudence, the Sixth Circuit Court of Appeals reversed and held that the presumption of prudence did not apply at the pleading stage, but only at the evidentiary stage. The U.S. Supreme Court rejected that as well, since the Court held the presumption of prudence does not apply at all. The Court found the presumption was not supported by the statutory language, which provides an ESOP exception from ERISA's duty to diversify but not from the duty of prudence – and Congress's intent to encourage ESOP investments does not override that. In addition, even where the plan document requires an employer stock investment, the regular duty of prudence applies rather than a requirement that only "dire" circumstances can override the plan language.

Conflict with Insider Trading Laws

The Court acknowledged that potential for conflict with the insider trading laws is a legitimate concern. In publicly traded companies, plan fiduciaries are often corporate insiders as well. However, the Court held that a presumption of prudence "is an ill-fitting means" of addressing the concern. The Court also recognized that lack of a presumption may put the fiduciary between a rock and a hard place, in that the fiduciary could be sued for failing to divest the stock, or could be sued for failing to allow the stock as an investment option where the plan documents require it. Again, though, the Court held that the presumption of prudence is not the proper way to address this concern; rather, a motion to dismiss for failure to state a claim is the proper mechanism.

Ultimately, the Court vacated the judgment of the Court of Appeals and remanded the case to consider whether the pleadings were sufficient to overcome a motion to dismiss. The Court referred to its previous guidance of considerations on the insider trading issue. As a general rule, where a stock is publicly traded, it would not be sufficient to claim that the fiduciary should have recognized the stock was overvalued based on publicly available information unless the plaintiffs could point to special circumstances affecting the reliability of the market price. With respect to nonpublic information available to the fiduciaries as company insiders, the Court said the plaintiffs must allege an alternative action that the fiduciaries could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund (for example, by driving the price down in a sell-off) than to help it.

Note that the case involved publicly traded employer stock, and does not provide much guidance for fiduciaries of ESOPs with non-publicly traded stock.

Next Steps for Plan Fiduciaries

In light of the Court's Dudenhoeffer decision, fiduciaries of retirement plans that allow investments in employer stock should reevaluate whether employer stock is a prudent plan investment. Fiduciaries can no longer rely on the Moench presumption that the investment would be prudent as long as the documents required the employer stock and the employer was not experiencing "dire" or other extreme circumstances. Instead, fiduciaries must evaluate all of the circumstances of the employer, within the confines of securities laws, and determine on that basis whether employer stock is a prudent investment under the plan. In other words, fiduciaries must treat an employer stock investment just like every other investment offered under the plan. If the fiduciaries determine that employer stock should no longer be offered under the plan, the removal of the stock should be undertaken carefully in order to best protect fiduciaries from participant claims for the removal of the stock.

Click here to print/email/pdf this article.

December 26, 2013

ERISA Plan’s Limitation Period Is Enforceable, Says U.S. Supreme Court

By Elizabeth Nedrow

The U.S. Supreme Court recently issued a decision that provides some welcome guidance to insurers and employers sponsoring ERISA employee benefit plans. The Court upheld a three-year limitations period in a long term disability plan. The terms of the plan required participants to file a lawsuit to recover benefits within three years after “proof of loss.” Heimeshoff v. Hartford Life & Accident Ins. Co.,No. 12-729, 571 U.S. ___ (Dec. 16, 2013). The Court ruled that because ERISA itself does not specify a limitations period, the plan’s three year deadline was reasonable and therefore enforceable.

Benefit Plan Participant Filed Lawsuit After Benefits Were Denied

Julie Heimeshoff, a senior public relations manager for Wal-Mart Stores, was a participant in a long term disability plan administered by Hartford Life & Accident Insurance Company (Hartford). In 2005, she filed a claim for disability benefits following a diagnosis of lupus and fibromyalgia. On her claim form, her rheumatologist listed her symptoms as extreme fatigue, significant pain and difficulty in concentration. Hartford denied her claim after her rheumatologist failed to respond to its requests for more information. In 2006, Heimeshoff provided Hartford with an evaluation from another physician who also determined that she was disabled. Hartford retained a physician to review Heimeshoff’s records who concluded that she was able to perform the activities of her sedentary job. Hartford again denied her disability claim.

After granting Heimeshoff an extension to the appeal deadline to provide additional evidence and retaining two additional physicians to review her claim, Hartford issued its final denial of benefits on November 26, 2007. On November 18, 2010, Heimeshoff filed suit in district court seeking review of her denied claim under ERISA’s judicial review provision, known as ERISA Section 502. Hartford and Wal-Mart asked the court to dismiss her suit because she did not file the case within the limitations period provided for in the plan, namely within three years after the time that written proof of loss is required to be furnished to Hartford. The district court agreed that the lawsuit was untimely and dismissed her case. On appeal, the Second Circuit affirmed. The U.S. Supreme Court agreed to hear the case in order to resolve a split among the Courts of Appeal on the enforceability of an ERISA plan’s contractual limitations period.

ERISA Contractual Limitations Provisions Should Be Enforced As Written

The long-term disability plan at issue stated that legal action against Hartford could not be taken more than three years after the time that written proof of loss is required to be furnished according to the terms of the policy. Written proof of loss is necessarily due before Hartford and the participant complete the internal review process and before a plan participant is notified of a final denial of benefits which is necessary before filing a lawsuit in court. The result of this contractual limitations period is that a participant has less than three years to file a lawsuit in court after learning that their benefit claim has been finally denied.

In reviewing whether to enforce this limitations period, the Supreme Court relied on well-established precedent which states that in the absence of a limitations period provided by a controlling statute, a provision in a contract may validly limit the time for parties to bring an action on such contract to a period less than that prescribed in the general statute of limitations as long as the shorter period is reasonable. The Court noted that ERISA does not specify a statute of limitations. Consequently, the Court ruled that a participant and a plan may agree by contract to a particular limitations period as long as it is reasonable.

Heimeshoff argued that the contractual limitations period at issue was not reasonable because it began to run before a claimant could exhaust the internal review process which is required before seeking judicial review. The Court unanimously disagreed, concluding that the three-year limitations period from the date that proof of loss is due was not unreasonably short and therefore, was enforceable. Although Hartford’s administrative review process took longer than usual, Heimeshoff still had approximately one year to file suit before the limitations period was up. Because Heimeshoff filed her lawsuit more than three years after her proof of loss was due, as required contractually by the plan, her complaint was time barred. Therefore, the Court upheld the dismissal of Heimeshoff’s suit.

Significance for Employee Benefit Plans

The Court’s decision is welcome news for insurers and employers who want efficient resolution of ERISA claims disputes. Plan documentation should be reviewed, and where appropriate, language should be added or clarified to provide a reasonable limit on the time a participant has to bring a lawsuit to challenge a denied claim for benefits.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.